Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

LONDON — Using a collection of criteria such as returns on capital employed and the free cash flow to asset ratio, I have attempted to identify the highest-quality companies on the market today. Here are three of the biggest qualifiers.

In the last five years, NEXT has grown dividends per share at an average rate of 13.8% a year. In that time, earnings have been rising by an average of 12.1% a year. NEXT is forecast to increase earnings and dividends for the next two years, at an expected rate between 7% and 11% per year.

What makes NEXT’s achievements so notable is the fact that in recent years, sales growth has been modest. Fortunately for value seekers, the shares trade on a 2013 P/E of 13.9 — that’s less than the average FTSE 100 stock.

2. Reed Elsevier plc (ADR) (NYSE:RUK)Reed Elsevieris a provider of “professional information solutions.” Products include leading industry journals — Reed Elsevier is publisher of both The Lancet and Gray’s Anatomy.

The recurring revenues provided by many of the company’s products underpin its ability to reward investors. In the last five years, dividends at the company have been increased by around 50%. Annual sales growth in that period has been a modest average of 3.6% a year. This has not stopped profit growth, however. Since 2008, reported net profits at Reed Elsevier plc (ADR) (NYSE:RUK) have more than doubled.

Two years of earnings and dividend growth are forecast. This puts Reed Elsevier plc (ADR) (NYSE:RUK) on a 2014 P/E of 13.1, with an expected yield of 3.5%.

3. Hargreaves LansdownAs Hargreaves Lansdownhas grown, its economies of scale have enabled it to become even more profitable. Last year, the company reported a net profit of 131 million pounds on 266 million pounds of sales. Five years ago, before the financial crisis, the company made 17 million pounds from revenues of 99 million pounds.

Part of the reason for this impressive record is the fact that many of Hargreaves Lansdown’s sales deliver recurring revenue (such as commissions on fund sales). This additional revenue is added at little cost to the company, meaning that profitability is ratcheted higher.

More massive growth is forecast for both earnings and dividends at the company. EPS (earnings per share) for 2014 is forecast to reach 37.1 pence per share, almost 50% ahead of the figure achieved for 2012.